9. Nasdaq-100 index funds
Overview: An index fund based on the Nasdaq-100 is a great choice for investors who want to have exposure to some of the biggest and best tech companies without having to pick the winners and losers or having to analyze specific companies.
The fund is based on the Nasdaq’s 100 largest companies, meaning they’re among the most successful and stable. Such companies include Apple and Alphabet, each of which comprises a large portion of the total index. Microsoft is another prominent member company.
Who are they good for? A Nasdaq-100 index fund is a good selection for stock investors looking for growth and willing to deal with significant volatility. Investors should be able to commit to holding it for at least three to five years. Using dollar-cost averaging to buy into an index fund can help reduce your risk, compared to buying in with a lump sum.
Risks: Like any publicly traded stock, this collection of stocks can move down, too. While the Nasdaq-100 has some of the strongest tech companies, these companies also are usually some of the most highly valued.
That high valuation means that they’re likely prone to falling quickly in a downturn, though they may rise quickly during an economic recovery.
Rewards: A Nasdaq-100 index fund offers you immediate diversification, so that your portfolio is not exposed to the failure of any single company.
The best Nasdaq index funds charge a very low expense ratio, and they’re a cheap way to own all the companies in the index.
Where to get them: Nasdaq-100 index funds are available as both ETFs and mutual funds. Most brokers allow you to trade ETFs without a commission, while mutual funds may charge a commission and have a minimum purchase amount.
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